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You are glossing over one important point: PayPal has a financial stake in keeping money within their network for as long as possible. For every month they kee

You are glossing over one important point: PayPal has a financial stake in keeping money within their network for as long as possible. For every month they keep $X within their network instead of releasing to the rightful owners, they have effectively seized whatever could have been earned by investing $X for that month. For smaller amounts (individuals, small campaigns like ours), this is negligible, but in aggregate, when you consider how much money PayPal is sitting on, this is a decidedly nontrivial sum. They have a strong incentive to routinely and as a matter of course withhold funds from legitimate businesses just because they can. This is what we are up against. Their talk about risk could very well be a smokescreen to justify the above behavior. This is not at all implausible, if they were only concerned about risk they could withhold fractional amounts for reasonable periods of time, on a rolling schedule. This is how less predatory payment processors I have dealt with handle this problem. We understand and accept that they may want to hold onto our funds for a reasonable amount of time to mitigate their risk. We don't expect them to release all the funds immediately. However we consider their threats to hold ALL THE MONEY for a FULL YEAR to be entirely unreasonable and not in good faith. In the face of such unreasonable demands we balked and sought help from both the community (public outrage) and our legal counsel, the Software Freedom Law Foundation in New York.

patio11 13y ago
I totally understand that this inconveniences you a lot. Be that as it may, your conspiracy theory has no basis in fact whatsoever. Paypal will, in fact, not make large amounts of money on transaction float -- they're already probably losing money on your account by talking to you too darn much. Interest rates are presently something like 15 basis points ($150 per year on $100k). Even if we count their underwriter as free, if you've spent an hour on the phone total, they're already in the red. They'd like nothing better than for you to be riskless and for them to be able to release all your funds tomorrow and for you to sell another $100,000 every day this year. (It also isn't clear to me that Paypal can licitly get any float on your money, due to banking regs, but that is deeply technical and not the kind of technical that I'm good at.) But that isn't the world we live in. In the one we do, pre-sales is an incredibly high-risk business model. f they were only concerned about risk they could withhold fractional amounts for reasonable periods of time, on a rolling schedule As I mentioned in a separate comment, while rolling fractional reserves do insure against risk in some business models, they don't do a great job of insuring for the risk of software not getting written or not meeting expectations. Assuming you have a multi-month development timeline, every risk your business is exposed to at N-1 days (your team members or your families falling ill, the project being technically beyond the capabilities, the money running out and you guys needing to delay shipping while mixing in freelancing to stay afloat, etc etc) is still a risk at N+1 days, unless you have shipped on day N. You're totally within your rights as a businessman to try to fight this in the court of public opinion or attempt to convince Paypal's legal department or a court of competent jurisdiction that they're in breach. I sympathize with you because I sympathize with people who are making things, but I think that Paypal has a better understanding of the risks involved in your enterprise than you do (and, unfortunately for the both of you, their upside being sharply less than your upside means they will tend to have more of a hair trigger with regards to that risk than you will).
- HerraBRE 13y ago
  Oh, I am sure PayPal are doing what they believe to be in their best interests. However, I think you overestimate their competence. The people we spoke with on the phone didn't even know what Open Source software is, let alone have an understanding of the risks involved. They were just following procedure.
  - mseebach 13y ago
    What does the license of the software have to do with the risks involved? What is the special case that they didn't understand that makes your project a smaller risk? What are the exact mechanisms in place that will prevent the project from failing miserably in any of the myriad ways software projects routinely fail after most of the money is spend and trigger a non-trivial number of chargebacks?
    - Xylakant 13y ago
      That for example this is not a software project where people for receiving the software. For example the perk for the $4096 backer tier is "In addition to the previous perks you and your logo will be the most prominently featured in our credits. You also get a custom feature / design theme per your specs (see the FAQ for some fine print). In addition, if you fly to Iceland we'll meet with you to discuss the implementation and then take you on a road trip through the Icelandic countryside, taste fermented shark and our traditional alcohol Brennivín, whilst we talking tech, politics and security." That's a pretty expensive chat to have, even if it includes the flight. Yet, two backers were willing to pay that price. All other tiers have a similar relationship between price and value provided. This cannot be explained in a rational business relationship - a solid gulp of idealism is included here. That influences the risk of chargebacks - backers paid to see this project worked on, not to receive their individual copy of the software.
      - orclev 13y ago
        That last paragraph is I think they key people aren't getting about IndieGoGo and Kickstater. You aren't paying for goods or services when you fund something on those sites, you're essentially donating towards the development of something, and gambling that in the future you'll receive something. The expectation is that the company/people you back will make a good faith effort to provide what they've said they will, but there's no guarantee you'll ever actually receive anything.

patio11 13y ago

I totally understand that this inconveniences you a lot. Be that as it may, your conspiracy theory has no basis in fact whatsoever. Paypal will, in fact, not make large amounts of money on transaction float -- they're already probably losing money on your account by talking to you too darn much. Interest rates are presently something like 15 basis points ($150 per year on $100k). Even if we count their underwriter as free, if you've spent an hour on the phone total, they're already in the red. They'd like nothing better than for you to be riskless and for them to be able to release all your funds tomorrow and for you to sell another $100,000 every day this year. (It also isn't clear to me that Paypal can licitly get any float on your money, due to banking regs, but that is deeply technical and not the kind of technical that I'm good at.) But that isn't the world we live in. In the one we do, pre-sales is an incredibly high-risk business model. f they were only concerned about risk they could withhold fractional amounts for reasonable periods of time, on a rolling schedule As I mentioned in a separate comment, while rolling fractional reserves do insure against risk in some business models, they don't do a great job of insuring for the risk of software not getting written or not meeting expectations. Assuming you have a multi-month development timeline, every risk your business is exposed to at N-1 days (your team members or your families falling ill, the project being technically beyond the capabilities, the money running out and you guys needing to delay shipping while mixing in freelancing to stay afloat, etc etc) is still a risk at N+1 days, unless you have shipped on day N. You're totally within your rights as a businessman to try to fight this in the court of public opinion or attempt to convince Paypal's legal department or a court of competent jurisdiction that they're in breach. I sympathize with you because I sympathize with people who are making things, but I think that Paypal has a better understanding of the risks involved in your enterprise than you do (and, unfortunately for the both of you, their upside being sharply less than your upside means they will tend to have more of a hair trigger with regards to that risk than you will).

HerraBRE 13y ago
Oh, I am sure PayPal are doing what they believe to be in their best interests. However, I think you overestimate their competence. The people we spoke with on the phone didn't even know what Open Source software is, let alone have an understanding of the risks involved. They were just following procedure.
- mseebach 13y ago
  What does the license of the software have to do with the risks involved? What is the special case that they didn't understand that makes your project a smaller risk? What are the exact mechanisms in place that will prevent the project from failing miserably in any of the myriad ways software projects routinely fail after most of the money is spend and trigger a non-trivial number of chargebacks?
  - Xylakant 13y ago
    That for example this is not a software project where people for receiving the software. For example the perk for the $4096 backer tier is "In addition to the previous perks you and your logo will be the most prominently featured in our credits. You also get a custom feature / design theme per your specs (see the FAQ for some fine print). In addition, if you fly to Iceland we'll meet with you to discuss the implementation and then take you on a road trip through the Icelandic countryside, taste fermented shark and our traditional alcohol Brennivín, whilst we talking tech, politics and security." That's a pretty expensive chat to have, even if it includes the flight. Yet, two backers were willing to pay that price. All other tiers have a similar relationship between price and value provided. This cannot be explained in a rational business relationship - a solid gulp of idealism is included here. That influences the risk of chargebacks - backers paid to see this project worked on, not to receive their individual copy of the software.
    - orclev 13y ago
      That last paragraph is I think they key people aren't getting about IndieGoGo and Kickstater. You aren't paying for goods or services when you fund something on those sites, you're essentially donating towards the development of something, and gambling that in the future you'll receive something. The expectation is that the company/people you back will make a good faith effort to provide what they've said they will, but there's no guarantee you'll ever actually receive anything.